Greece's own central bank is warning the country will painfully crash out of the EU without a bailout

A
worker cleans the facade of the Bank of Greece in Athens February
16, 2012.REUTERS/John
Kolesidis

Greece's arm of the European Central Bank, the Bank of Greece
(BoG), just released an explosive warning about what will happen
if
a deal isn't reached on Greece's bailout.

The central bank thinks Greece could face a "painful" default, an
exit of the euro, an eventual exit of the European Union and
soaring inflation.

The document, part of the Bank's regular monetary policy
report, will almost certainly add to Greece's political
firestorm. Yannis Stournaras, the governor of the BoG, was
previously finance minister under New Democracy, the current
government's primary centre-right opponents.

What's more, the Bank says some €30 billion ($33.82 billion,
£21.48 billion) left the commercial banking system between
October 2014 and April 2015, with confidence in the solvency of
the financial system dwindling.

Greece is in talks with its international creditors over the last
portion of the country's bailout funds, arranged under the
previous government. Accessing the €7.2 billion (£5.18 billion,
$8.10 billion) package will give Greece the cash it needs to make
the most immediate debt payments.

Without it, all hell will break loose, according to the BoG.
Here's the most important passage (emphasis ours):

Failure to reach an agreement would, on the contrary,
mark the beginning of a painful course that would lead
initially to a Greek default and ultimately to the country's exit
from the euro area and – most likely – from the European
Union. A manageable debt crisis, as the one that we are
currently addressing with the help of our partners, would
snowball into an uncontrollable crisis, with great risks for the
banking system and financial stability. An exit from the euro
would only compound the already adverse environment, as
the ensuing acute exchange rate crisis would send inflation
soaring.

The whole document is pretty damning. Here's another snippet on
the consequences of Grexit (again emphasis ours):

All this would imply deep recession, a
dramatic decline in income levels, an
exponential rise in unemployment and a collapse
of all that the Greek economy has achieved over the years of its
EU, and especially its euro area, membership. From its position
as a core member of Europe, Greece would see itself relegated to
the rank of a poor country in the European South.

The BoG is also pretty stark about its own inability to forecast
what comes next, given the uncertainty of the situation. It's
unusual to read a central bank admit that "it is not possible at
present to make any safe projections about the future course of
the economy."